I think a lot of ya guys are kinda missing something important about all of this.
Digital Distribution could very well be the thing that saves the Video Game industry. Look at us now. All we have are God of War clones and Gears of War clones. Everything is so extremely derivative. 99% of the games out there are all about how cool it is to blow someones head apart.
Why? Because these are the games that have proven to be profitable. You can make money with them. With game budgets getting huger and huger, you have to guarantee a return on investment or else you'll end up with a huge debt.
How do you solve this? By reducing the barriers to getting a product out there. It's a lot easier to get creative products to make a profit if you don't have to worry about over-producing physical copies, don't have to worry about manufacturing packaging and discs, etc.
It's why some of the best games we have seen this gen have been on Steam, on PSN, on XBLA, and on WiiWare. Those are the only places where you are allowed to be creative. I'll take AudioSurf, PixelJunk Monsters, Castle Crashers and World of Goo over most of the shlock that gets sold for $40-60 any day of the week.
10 years ago, I would have thought that making a video game and making money off of it was nothing but a distant dream. These days, it's possible. A few years from now, the likelihood is only going to get better.